Game companies may be playing games

FTC is investigating billing and looking for abusive practices

Apr 20,2019

Last month, a 45-year-old office worker surnamed Kim was unpleasantly surprised when he received his February credit card bill: an 800,000 won ($703) mobile game purchase. The culprit was his son. All Kim did was hand his smartphone to his son, who asked to borrow it for games.

Kim called the game company asking for a refund, but he was denied. The company said there was no way to confirm whether the purchases were made by a minor. Kim looked through the term and conditions, but found that refunds are not guaranteed in cases like his or even on occasions of identity theft.

“They’re denying refunds for the mistakes of minors and putting the responsibility on parents - personally, it feels like they’re ripping off children,” Kim said.

The Fair Trade Commission (FTC) has started to investigate these practices. It said Friday that it recently sent an official statement to 10 game companies on the matter. Among the recipients are the industry’s top three, often referred to as the 3N: Nexon, Netmarble and NCSoft.

The FTC plans to order reforms by the end of the first half if the investigation demonstrates abuses.

“The Korea Consumer Agency received more than 15,000 reports on game-related damages,” said an FTC official.

The FTC says six types of user terms are problematic. This includes imposing unconscionable conditions for claiming refunds, putting excessive responsibility on minor users and their parents and blocking a user account without considering the seriousness of the violation.

One item on the FTC list has the potential to greatly impact the performance of the game companies. Refusing to refund a charge if it was incurred by a minor is a significant issue.

One company recently introduced the following language in its user agreement: “Payments made by a minor without the legal representative’s consent can be canceled. But refund requests for charges falsely said to have been made by a minor will not be accepted. Whether the buyer is a minor will be judged based on the device and payment account ownership.”

“Simply put, this means there needs to be proof that the minor paid for the games behind the parent’s back,” said Ma Mi-young, who heads the Korea Consumer Agency’s service team. “This is not easy to prove, and that’s why there is room to argue that the terms are unfair.”

The FTC also raised a question about the refusal of some game companies to make refunds on the grounds that games are “content” and therefore not subject to online commerce laws that oblige refunds to be made within seven days.

Gaming companies say the proposed measures are excessive. They argue that minors spending big on games is also the result of bad parenting. Why, they ask, should the companies take all the blame?

“Despite the terms, in reality there are cases where the company would make a refund even if the parent can’t prove the minor is responsible,” said an unnamed source from a game company. “Some parents are ignorant about their children playing games or are loose in managing their payment passwords - it’s excessive to tell us to refund without conditions.”

A big issue is the practice of “refund abuse.” In online game communities, it’s not difficult to find posts about how users got refunds and free in-game purchases.

“There are a lot of cases where it was the parent who actually made the purchase but asked for a refund saying it was the kid,” said Bae Woo-sung, a senior researcher at the Korea Association of Game Industry. “Even now, refund abuse is a serious problem, but if the terms are forced to be changed, this can lead to even more cases.”